North American crude supplies to challenge rails, pipelines

13 March 2012 23:50[Source: ICIS news]

SAN DIEGO, California (ICIS)--Growing oil production in North America will challenge pipe and rail logistics, an analyst said on Tuesday.

The combined production of North American conventional crude oil, Canadian heavy bitumen oil and shale oil production is expected to reach more than 10m bbl/day by 2015, said Purvin & Gertz vice president Stephen Jones.

As a result,“Rail developments are really taking to the tracks,” Jones said at the annual meeting of the American Fuel and Petrochemical Manufacturers (AFPM) in San Diego.

Production in Western Canada will exceed 3m bbl/day by 2015, which will pose a logistical pressure point to logistics in North America, Jones said.

Three major shale plays, the Bakken in North Dakota, Eagle Ford in Texas and Niobrara in Colorado and Wyoming, are projected to produce 2m bbl/day by 2010, which also creates a logistics challenge.

As pipelines are planned to serve the crude production at the shale plays, the production rate needs to hold its strength, meaning a continued increase in the number of rigs at the sites, said Jones.

Shale production has a swift rate of decline, but drilling activity must stay robust for a pipeline project to be economical, Jones said.

Existing pipelines inbound to the US midwest have a capacity of about 5.0m bbl/day, while outbound pipelines have a capacity of about 0.2m bbl/day, said Jones.

He said there is a need for additional outbound pipeline capacity, such as would be provided by the Keystone XL project. The Keystone capacity would be upwards of 700,000 bbl/day, in addition to the 435,000-bbl/day capacity for the section from Cushing, Oklahoma, to the US Gulf and the 100,000 bbl/day Bakken market link, said Jones.

Pipeline projects include more than 1.0m bbl/day of capacity outbound from Cushing, and there are west coast pipeline projects with up to 1.0m bbl/day in capacity, said Jones.